Should cheques be chucked?

cheque©iStock.com/Elenathewise

CHEQUES, that simple alternative to the sometimes complicated exchange of cash, have been around now for 350 years.

The UK Payments Council, however, has no room for tradition: it intends to phase out cheques by 2018.

If the council was hoping that the cheque's passing would go unnoticed, though, they were out of luck.

The news was met with consternation from older people's groups and charities who fear that the end of the cheque era could cause unnecessary stress and, following a furore, the council was forced to promise a further review in 2016.

But what should they decide? Should cheques be chucked?

Abolishing cheques

Cheques emerged from a payment method called the 'bill of exchange' which was originally used among traders to avoid carrying around weighty currency.

They slowly increased in usage, reaching a peak of popularity in 1990, but societal and generational differences as well as the rise of debit cards, the ban on credit card cheques and innovations such chip and pin and contactless payment methods have led to a steep decline in their usage.

The Payments Council, the overseers of payment strategy in the UK, announced over two years ago that cheques would be phased out in 2018.

The decision was the final nail in the coffin for the humble cheque, whose popularity had been declining over the last couple of decades.

Brits were inking 2.4 billion cheques in 1990 but the figure had dropped to just 663 million in 2008.

Since then the decline has only continued further with an average of 333,000 fewer cheques written every day in the last three months of 2010, compared with the same period in 2009.

The reasoning behind banishing the chequebook to the dustbin of history is clear: cheques cost more for financial institutions to process than credit card transactions. This unnecessary cost would be eradicated if cheques were replaced by more technologically advanced methods of payment.

In addition it is hoped that the abolition of cheques will encourage people to adopt different, more contemporary, methods of payment such as credit cards.

However, the attempt to abolish the cheque is a bit of an ongoing saga between the cheque hates and the cheque mates.

The decision to abolish the cheque was made too hastily according to a Treasury Select Committee which earlier in the year decided to review the decision to chuck cheques on the basis that, "a decision of this size, which affects millions of people, businesses and charities, should not be imposed on us de facto."

"We are demanding more rigorous analysis; the public deserve no less. I am asking the question: is it right that one institution can force through such a radical change in our behaviour?"

In particular, MPs are concerned about vulnerable older people who currently rely on cheques although The Payments Council, which is run by the banks and building societies, said that they wouldn't go without being replaced by suitable alternatives accompanied by information provision on the new methods of payment.

Sarah Brooks, head of Financial Services at Consumer Focus, agreed that the group of concerned MPs should be concerned: "Banning cheques could spell bad news for many who rely on them, especially older people, small businesses or the self-employed.

"Not everyone has internet access, can easily get to cash machines or is willing to pay by credit card or share their bank details to organise electronic payments."

Who uses cheques?

If there is opposition to the abolition, then someone must still be using cheques but who?

A whole variety of different people utilise the cheque on a daily basis and, it appears, are prepared to continue the fight to save them.

Small businesses, handymen and others who are traditionally paid by cheque as well as schools, charities and clubs, where the ease of paying via cheque is the main reason for its use, all still support the retention.

Cheques are particularly popular amongst the elderly and this is where most of the outcry has arisen.

Charities such as Age Concern and Help the Aged have expressed concerns that older people may have problems adjusting to the technology of alternative methods.

They stress that there should still be a paper based alternative to the cheque if this scheme is carried out, at which point you might as well just keep cheques in the first place.

On the other hand...

Perhaps, however, the campaign to retain the cheque is running out of time to save its beloved institution.

Isn't it simply time to face the music and accept that like other great things - the Sinclair C5, British success at Eurovision and line dancing to name but three - sometimes its better to just move on to more advanced ideas?

There is, as we've seen already considerable evidence that cheque use is declining all by itself.

The number of retailers still accepting cheques has dropped sharply in the past few years. None of the big supermarket chains have accepted them in the past two years, for example.

What's more, the abolition is, by some measures already well underway.

Despite its promise of a review, the Payments Council is still planning to close the cheque system completely by 2018 and has already ended the use of the cheque guarantee card system.

The impact of the loss of guarantee cards is up for debate, independent research which questioned 7,000 consumers and 2,000 businesses found that cheque use hasn't changed all that much since the guarantee scheme closed.

Just under 90% of cheque users said that they'd had a problem having a cheque accepted since the scheme closed.

Nevertheless the scrapping of the cards, despite widespread opposition, is a symbolic victory for those intent on doing in the cheque.

In addition, not everyone thinks that older people won't be able to cope with the cheque's demise.

Saga magazine hit back against criticism of the closure claiming that the over 50s will have more than enough time to adapt to new methods as cheques will be phased out over such a long period of time.

Saga's position as a major credit card provider does makes them more than a little biased, however.

Whilst MPs, urged by concerned constituents may well have rattled their sabres in order to get the Treasury Select Committee to speak out against the abolition of cheques in 2018, it is clear that the effort to replace cheques with chip and pin debit cards and other forms of payment technology such as contactless cards is gaining enough ground to see them out the door.

From the banks' perspective cheques are a time consuming and costly way to process payments.

In the meantime, the Payments Council will monitor all current payment methods and reach a final decision in 2016.

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